Question Details

What must be happening with the Canadian dollar and the U.S 



1. "The deal won't hold together if, say, recession-bound Spaniards are screaming for easy money while inflation-wary Germans want to keep money tight." What deal is being talked about here? 
a) a common currency a) a flexible exchange rate 
c) a full employment guarantee d) freedom to operate independent monetary policies 
2. “For many years the driving force behind the global economy has been a tacit agreement between the U.S. and China. The U.S. provides a ready market for cheap Chinese goods and keeps mostly silent about the way China manages its currency and despoils its environment to sustain growth. In return, China helps finance …..” This clipping is best completed with 
a)	investment spending in the U.S. 
b)	consumption spending in the U.S. 
c)	U.S. imports 
d)	the U.S. budget deficit 

3. “Yesterday the Fed announced the stunning decision that it would buy up to $300 billion of long-term US Treasury bonds to help jolt the economy out of its deep depression.” This action would help jolt the economy out of recession because 
a)	$300 billion of extra spending is a huge stimulating fiscal policy 
b)	it increases the money supply dramatically 
c)	taxes will fall because less government spending needs to be financed 
d)	the exchange rate will increase markedly 

4. “Speculation that Japan would not intervene ahead of the meeting helped yen bulls weaken the dollar to ¥113.58, a level not seen since January 2001” Before the exchange rate moved to ¥113.58, what would have been a more likely exchange rate, and how would Japan have intervened had it wanted to? 
a)	¥110.58; by buying yen on the foreign exchange market 
b)	¥110.58; by selling yen on the foreign exchange market 
c)	¥115.58; by buying yen on the foreign exchange market 
d)	¥115.58; by selling yen on the foreign exchange market 

5. “Normally, an overheating economy would demand higher interest rates to keep inflation in check, but the Bank of Canada said the Canadian dollar and the situation in the U.S. have allowed it to hold its key interest rate steady yesterday.” What must be happening with the Canadian dollar and the U.S ? 
a)	dollar high; U.S. in recession 
b)	dollar low; U.S. in recession 
c)	dollar high; U.S. in boom 
d)	dollar low; U.S. in boom 



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